The national oil company, the Nigerian National Petroleum Corporation (NNPC) is currently in the eye of the storm, what with the orchestrated calls for the outright scrapping of the public corporation considered a behemoth that has remained a drainpipe on the economy thus far. In his report Ibrahim Apekhade Yusuf examines the issues
To say that the corporate existence of the Nigerian National Petroleum Corporation (NNPC) is under severe threat is an understatement. Truth is, the over 38 years old corporation, which has had a rather chequered existence thus far and literally surviving on a life-support machine may well be on its way out for good if the President Muhammadu Buhari administration has its way.
Of course, the reason for this decision may not be far to seek, chief among which borders on the growing level of malfeasance associated with the national oil company over the years by successive governments.
But how did NNPC, established on April 1, 1977 as a merger of the Nigerian National Oil Corporation and the Federal Ministry of Mines and Steel, came to this sorry past? A short anecdote will suffice.
The unraveling of NNPC
It is anybody’s guess why the NNPC remains the subject of public interest anytime, any day.
Although not much was known about its methods and processes due largely to high bureaucracy, the first attempt at unraveling the corporation began few years ago when the Nigeria Extractive Industries Transparency Initiative, NEITI had revealed that the management of NNPC ran a largely opaque organisation whose guided secret was kept by a few men in the corridors of power.
A Pandora’s Box
The first indication that all was not well with the NNPC was made public by the Nuhu Ribadu-led Petroleum Revenue Special Task Force in 2012.
The Ribadu panel detailed how the Nigerian government and national oil company, NNPC, treat huge oil revenues accruing to the federation as a reserve of money that could be used for illicit purposes without accountability.
In its 178-page report, the committee had revealed how oil money in the custody of the NNPC was spent on extra-budgetary purposes such as the acquisition of a N2.23billion chopper for the president and a purported sponsorship of the World Cup.
The NNPC, the committed revealed, also gave out N700.5million in loan to Sao Tome & Principe based on instruction from the presidency. It also made a curious payment of N2.421billion to a foreign company, Royal Swaziland Sugar Company. The reason for the payment is unclear.
The corporation also claimed to have underwritten a N521million expenses incurred by the Federal Ministry of Petroleum Resources. This is in addition to the N250million the agency told the committee it spent on court cases involving the ministry.
The ministry has its own budgetary allocation and it is unclear why the NNPC is paying for its expenses. The nature of some of the expenses are also unclear.
The committee also found that the NNPC was being used as illegal lender to presidential committees, ministries and parastatals. For instance the corporation claimed it incurred about N20billion on the Presidential Implementation Committee on Maritime Safety and Security, based on instruction from the presidency.
The Ribadu committee also disclosed that about $1billion in signature bonuses, discrepancies in payment by the NNPC, and debts from oil companies were unaccounted for by the NNPC and the Department of Petroleum Resources.
The allegation came weeks after the then Central Bank Governor, Sanusi Lamido, blew a whistle on the NNPC, accusing it of diverting not less than $20billion of oil revenue.
Expectedly, in its quest to unravel these mounting allegations, the federal government had sought a audit of the NNPC accounts but the outcome was only made public at the end of twilight of the then President Goodluck Jonathan’s administration.
Naturally since his assumption of office, President Buhari, himself a former Minister of Petroleum, has met the top hierarchy of NNPC management and the Ministry of Petroleum Resources to express his concern over the huge impact of crude oil theft on the country’s economy.
NNPC’s swansong
Apparently worried by the corruption that has bedevilled the NNPC, Kaduna State Governor, Malam Nasir el-Rufai, had a fortnight ago called for the scrapping of the corporation as a panacea for putting the country’s oil sector in good stead.
Delivering a lecture: “Nigeria and the Oil fortune” at the 2015 Wole Soyinka Centre’s Annual Media Lecture, in Abuja, El-Rufai said: “We need a mix of fresh strategic thinking and a firm commitment to reform. We need to define exactly what we want the oil industry to be and to achieve, and then define the structure that can best deliver it.”
According to him, “An efficient and productive oil sector, able to create jobs, spur industrialisation and earn more revenues requires that we tackle the monster that the NNPC has become.
“This country can no longer afford to maintain an NNPC that arrogantly, unlawfully and unconstitutionally spends an unhealthy proportion of national oil earnings on itself.
“We should replace the NNPC with brand new organisations that are fit for purpose, among others, a commercialised and corporatised national oil company and new industry regulators. This new national oil company should be capitalised once and for all, and then freed to fend for itself like other national oil companies do, seeking its financing independently from the financial markets and paying due taxes and royalties.
“The corruption and nonchalance that have hobbled the NNPC are symptoms that its best days are over. We should give it a deserved funeral so that a new institution, active and nimble, can promptly replace it. NNPC’s subsidiaries and associated companies can be reviewed, restructured and privatised or commercialised as appropriate consistent with national interest and objectives.”
The governor noted that, “The long and short of the situation of our oil industry is best exemplified by the parallel government called the NNPC. In 2012, it sold N2.77 trillion of ‘domestic’ crude oil but paid only N1.66 trillion to the Federation Account. In 2013, it earned N2.66 trillion but paid N1.56 trillion to FAAC; in 2014, N2.64 trillion (was earned) but remitted N1.44 trillion, while between January and May 2015, it earned N733.36 billion and remitted only N473.2 billion! That means that the NNPC only remitted about 58% of the monies earned between 2012 and the first half of 2015. A company with the audacity to retain 42% of a country’s money has become a veritable parallel republic.”
On the way forward, the governor said, “Government should review the Joint Venture strategy, with the governing principle being to shift the financing and operational risks to the markets and operators respectively. Government should avoid owing the oil companies, and should more proactively review the terms and implementation of the Production Sharing Contracts (PSCs) and concentrate on collecting the royalties and taxes due to it.
“No one is better qualified to do this than the person that birthed the NNPC through the merger of the NNOC and the Ministry of Petroleum in 1977 President Buhari himself. No one can appreciate the gap between the vision of NNPC’s founding fathers, the beautiful baby of 1977 and the 38-year-old monster it has become better than President Buhari. The NNPC of today must make Chief Sunday Awoniyi of blessed memory squirm in his grave. Something fundamentally decisive must be done to tame this monster.
“We must have the political will to make all oil industry transactions transparent. There should be clear rules and processes for licensing, concessioning, procurement and contracting. Opaque systems tend to be corrupt, and it is time to shine the light.
“The president has already taken the commendable step of directing that all revenues be remitted either to the Federation Account or the consolidated revenue fund as required by sections 80 and 162 of the Constitution. President Buhari is, therefore, clear that oil industry revenues will no longer be treated as some slush fund of the Federal Government.
“It is the national consensus that we arrive at regarding the oil sector that we can finally codify in a new petroleum act, which should be a simply worded, concise piece of legislation that spells out the general governing principles for the industry. Specific matters can then be based on subsidiary legislation, regulations and agreements. Complex and densely worded laws conduce to opacity and should therefore be avoided.”
Meanwhile, the Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Hajiya Zainab Shamsuna Ahmed, had last Wednesday handed over the dossier on the sharp practices in the Corporation to El-Rufai at the Government House in Kaduna.
El-Rufai is one of the four governors appointed by National Economic Council (NEC) to investigate the management of the accounts of the NNPC and the Excess Crude Account (ECA) by the administration of former President Goodluck Jonathan.
The committee of four has a mandate to unravel the whereabouts of the N3.8 trillion not remitted to the Federation Account by the NNPC between 2012 and May as well as the $2.1bn said to have been deducted from the ECA without proper authorisation by the Federal Accounts Allocation Committee (FAAC).
In her presentation on how billions of dollars of oil revenue not remitted to the Federation Account by the NNPC, the NEITI chief said about 160 million barrels of oil, valued at $13.7 billion, were stolen between 2009 and 2012.
Calling on the Federal Government to privatise the nation’s refineries, Hajiya Ahmed said there was no proof that the $11.631 billion subsidy payment captured from 2005 2012, was remitted into the Federation Account by the Corporation.
Hajiya Ahmed said: “Crude product swap of $866m was lost from 2009 to 2011 and $82.43m in 2012. Total amount expended on subsidy payment from 2005 to 2012 as captured, $11.631m have been paid to the NNPC. However, there is no evidence this amount was remitted to the Federation Account.”
Divergent views
Expectedly, the El-Rufai’s argument for the scrapping of the NNPC did not resonate with a lot of people.
Specifically, oil workers, under the umbrella of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), said it was clearly opposed to the scrapping of the corporation.
Speaking on behalf of the group, its scribe, PENGASSAN, Lumumba Okugbawa, said that instead of “kill the NNPC,” the body should be insulated from undue political interference that often distract it.
Okugbawa noted that corruption issue in the NNPC mentioned by El-Rufai is a problem hindering Nigeria’s growth and development in the oil and gas sector as a whole, adding, that the government should deal with the corruption in the system but not to ‘throw away the baby with the bath water.’
He said that NNPC, created by an Act of Parliament in 1977 and made up of the holding office, subsidiaries and service units, had been subjected to undue political interference, which hinders its autonomy for effective running and competitiveness in the past six years, noting that, that should not be a yardstick for the scrapping of the corporation as demanded by the governor.
He said, “If you look at the NNPC as it is today, it has been politicised, with most of its decisions and operations being influenced with political motives and at times, executive fiat. The corporation is so much tied to the apron of the political office holders but not the technocrats that are at the helm of its affairs,” PENGASSAN said.
Some of the areas of interference listed by Okugbawa include; appointment and removal of the Group Managing Director (GMD), Group Executive Directors (GED) and Managing Directors of NNPC subsidiaries at the whims and caprices of the President, and limited financial autonomy for its operations.
The unionist said, “NNPC should be a national oil corporation that can compete globally like Saudi Aramco of Saudi Arabia, Petronas of Malaysia, Petrobras of Brazil and Statoil of Norway, among others, given the opportunities and market potentials.
“If we take a look at NNPC contemporaries in the world, such as Saudi Aramco, Petrobras, Petronas and Statoil, we will notice that their holding governments give those companies freedom to grow and expansion of the companies to the great benefits of the citizenry and their respective governments.
“Operations and administration of NNPC comes under several masters and conflicting instructions, some of which defy the national objectives and aspirations for setting up the national oil corporation and its subsidiaries,” the union argued.
Other stakeholders in the petroleum industry admonished the Buhari administration to ensure continued existence of the NNPC, just as they canvassed structural reform for the oil giant.
In a statement signed by the Centre for Petroleum Information (CPI) in Lagos, it said NNPC holds great prospects for development of the nation’s oil sector.
The forum’s Chairman, Chamberlain Oyibo, and the Executive Director of CPI, Victor Eromosele, who spoke at a public forum, said “Nigeria will always need a national oil company, by whatever name, to achieve desired goals of the government for the oil industry.”
While making a case for the diversification of NNPC, Oyibo said other national oil companies like Statoil of Norway, operate on higher profile by engaging in activities in 25 countries, while Petronas of Malaysia operates in 34 countries, but NNPC operating only in one country (Nigeria).
According to the CPI, for NNPC to operate as a commercial entity and run like other national oil companies as an accountable, commercial entity, it must be given the freedom to operate and without the undue constraint imposed by remote influence. “NNPC can be efficient and can create substantial value, currently lost.”
According to the forum, if the dearth in investment in recent years in Nigeria’s petroleum industry, reflected in declining production and static hydrocarbon reserves, is to be reversed, some form of industry-wide restructuring is imperative.
High turnover of GMDs
Besides government interference, it is instructive to note that between 2009 and now, there have been five GMDs for NNPC, namely, Dr. Mohammed Barkindo (2009-2010); the late Alhaji Shehu Ladan (April-May 2010); Austen Oniwon (2010-2012); Andrew Yakubu (2012-2014) and Dr. Joseph Dawha (Aug 2014 till date).”
Commenting on the turnover of CEOs, Mr. Odein Ajumogobia, former Minister of State for Petroleum, disclosed that Nigeria’s petroleum policies have always been incoherent, due to the constant change of key officials, in the NNPC and the Department of Petroleum Resources, DPR.
According to him, this instability brought about by the constant changes of key officials is not a recipe for coherent policy making.
He said, “Petroleum policy is not always entirely coherent due in part to the frequent change of important officials. Since NNPC was created 38 years ago, we have had 16 Group Managing Directors (GMD). In 30 years, from 1977 to 2007, there were nine, average of one every three years.”
In the view of Chief Amakiri Mike, a public affairs commentator, although the Buhari-led government had not publicly announced the decision to scrap the NNPC, the possibilities exists.
According to him: “Given the fact that NNPC became the poster boy of anything goes, it is just as well that a structural change is effected on that agency.”
“I heard a statement by El-Rufai that it is only in Nigeria that one company can bankrupt a whole nation. That’s NNPC. And if that’s the truth, then it means Nigeria has a big problem. So there must be a major overhaul of that body. We cannot continue to condone a situation where a few individuals will continue to hold the rest of over 170 million Nigerians to ransom,” Amakiri said.
NNPC, he observed, “should be in the level of companies like Petrobras or Petrolas. That was the concept of NNPC. How can a corporation alone spend more than the national budget? Something is definitely wrong somewhere. But we thank God that we have a president who has come on board who is so diligent and incorruptible and his intention is to clean up the mess created by the culture of corruption and we as Nigerians need to give him our total support to help him achieve that goal.”
As the argument for the scrapping of the good old NNPC goes back and forth, the public waits in bathed breathe what the final decision of the Buhari-led administration would be. NNPC to be or not to be, that is the question.
